Posted at 10.05.2018
As Purchasing Supervisor for Grandiose Motors, I've endeavored towards ongoing critical evaluation of the prevailing processes and insurance policies that has impact on the daily functions, with the goal of promoting efficiency, minimizing costs and additional enhancing the performance of Grandiose Motors. This statement aims to give solutions to the challenges faced by Grandiose due to its growth, of purchasing and availability of service parts and materials which play a substantial role in its operation and sustainability of the business enterprise. This report endeavors to critically measure the process and send recommendations for endorsement of the management. It will highlight the importance of purchasing and inventory management regulations and steps and introduce the idea of supply chain management as method for operation challenges and strategies as well as performance management in conditions of deliverables and service levels of Grandiose Motors to its stakeholders especially to its customers.
1. 1 Aims
2. 0 Record: Grandiose Motors
3. 0 Critical Evaluation of the existing Purchasing and Inventory Function for Grandiose Motors Dealership network
4. 0 Recommendations
TASK 1: Referrals regarding structuring the purchasing and inventory functions: SCM Execution at Grandiose Motors Business Operation
Supply Chain Management
Purchasing and Inventory Management Insurance policies and Procedures
TASK 2: Tips for different purchasing and inventory management insurance policies for sale of different kinds of service parts and materials
TASK 3: Source String and Inventory management concepts made to reduce Investment and space requirements and keeping adequate service levels of Grandiose Motors
Solution to lessen Investment and Space requirements
Performance Management and Service Levels
Grandiose Motors: Operational Strategies and its Implication
SCM pros or SCM consultant or practitioner
Using SCM ERP Packages
6. 0 List of References
Grandiose Motors is foreseeing that the sustainability of its successful performance and reliable service is to manage its current problems -ensuring option of service parts and materials and finding a solution to facilities and warehouse space requirements to support the expansion of Grandiose Motors's business. To maintain the company's progress, impending obstacles for the company have been identified and the need to dwelling address them has been brought up.
This report was created to critically examine current processes involved in the operation and suggest some advice to address the forthcoming issues. A concept and the belief from industry methods that Supply String Management solves inventory and warehousing matter for business procedures, is an option that Grandiose Motors want to explore. This newspaper will provide a synopsis of how Source string can help business procedures as well as solving the existing challenges of the business.
Grandiose Motors was founded 15 years ago, beginning with one office it is continuing to grow to its fourth automotive dealership. Grandiose Motors is involved in auto sales and after sales servicing. Taking care of four automotive dealerships and catering to over a million consumers requires hard work, consistency in customer support and constant improvement to ensure sustainability of the business enterprise. The automotive dealership of Grandiose Motors controlled autonomously wherein only 1 car make is being sold and serviced. The business enterprise was started out with the acquisition of the Mitsubishi dealership; after over a decade it acquired already obtained two more and now it is on its fourth dealership, the business is now going beyond being synomomous with one car make. The brand new dealership is his first "auto supermarket" where they sell multiple car makes. This consists of Nissan, Toyota and Volkswagen.
The success of Grandiose Motors is attributed to three interdependent key factors. First is amount, second is its marketing methodology "hassle-free buying experience" and lastly, its solid reputation for after sales service. These three factors are cyclic naturally, the high level of sales pertains to availability of selections of automobiles and car makes, then your buying experience entices customers to make their buys at Grandiose Motors and of course, all cars buys are taken care of to ensure its usability and this is done through after sales service- like diagnosing maintenance, timely and productive service and exceptional customer experience. Grandiose Motors is bank on these performance indicators as their sound foundation because of their customers. They have gained the self-confidence of their buyers, thus, they are really known as a reliable car sales dealer and have excellent after sales support and servicing.
Currently, the purchasing and inventory function of the four dealership network of Grandiose Motors employs that they purchase their own service parts and materials. Grandiose is following decentralized purchasing policy where each dealership is buying their inventory independently. It contributes to higher costs and more time for taking care of inventory at each dealership. Centralized purchasing insurance policy assists with better control over inventory investment, space, volume and cash discounts and assures uniformity in quality and reduces overlap and duplication of purchasing work. Grandiose is not profiting from these features of centralized purchase coverage, (Ng & Lam 1991).
Supplies forecasts derive from historical demand data since service and materials requirements derive from seasonality factors. These seasonality factors derive from weather - during the winter there are high requirement of batteries while during summer time there are high requirements for air-conditioner parts. On the other hand, during fall months there are high requirements for antifreeze. Furthermore, Grandiose Motors may have seasonal advertising for vehicle sales and its services; therefore there will be needs for service parts and materials. Grandiose is not managing inventory risk associated with seasonal products effectively. By by using a pull agreement it can get discount on the costs as well as the inventory risk will be after the supplier rather than the retailer through the season, whereas the chance will be with the retailer before the season (Cachon 2004).
Due to different car models and car make sold by Grandiose Motors, there's a demand for service parts and materials for each kind and model. Alternatively, there are numerous types that needs to be maintained and placed available. The equipment are used to service vehicles and some are sold to consumers over the counter. Parts suppliers will be the car manufacturers and professional wholesale to keep up authenticity. There are many suppliers for oils, lubricants and lover belts. The treatment of these two types of purchasing should be different as the demand, procurement, type of suppliers and inventory and storage area is very different. For instance high inventory should be maintained for quickly moving parts, where as small inventory for poor moving parts (Duft 2010). As well as the purchasing should be centralized for products like oils, lubricants and supporter belts where for genuine free parts it could be centralized (Bossart et al. 2007).
Grandiose is able to maintain hassle free buying experience as well as spectacular customer servicing, by guaranteeing lowered cost principle, service and repair using the right parts and repairs at the right time as well as reliable after-sales servicing. This key performance policy is probably not sustainable in the foreseeable future as the company is managing various spare parts of different automobiles and if the current policy is not transformed about how precisely it deals with the procurement, inventory and storage space of different parts, cost will definitely increase because they are not using effective ways like inserting the immediate moving parts in such a way they are common to the employees for restocking, using mechanical means to cope with and movie stock. This may decrease the labor cost and time (Duft 2010).
From the above critical analysis of the existing inventory process it is visible that Grandiose needs restructuring of its inventory handling function. Grandiose Motors is growing, the company wants to make certain that the business enterprise operation will continue through increased customer experience and sustainability of the company's after-sales service and support. The correct use of space for storage for inventory is also vital because space is costly and with the new dealership acquisition investment funds, space and service support are over stretched. Furthermore, financial resources on hand is depleted in every business investments. It can be said that restructuring and purchasing and inventory resource string management will dwelling address these operation at constraints.
Based on the above critical evaluation this suggestions are being advised for Grandiose Inventory management with relationships to the different jobs or forthcoming obstacles.
Supply Chain Management (SCM) can solve its current issues in space, supplies and budget. As supply chain pertains to proper and systemic coordination of all business factions for a business with the goal of efficiency and long-term performance improvement, SCM is the best option for Grandiose Motors. This includes products, services, budget and information from one source to the other within the string of procedure and right down to the consumer or person. The entire reason for SCM is to set-up value for the business and the buyer (Jespersen & Skjott-Larsen 2005). SCM can be utilized as a competitive strategy which integrates suppliers and customers; also it reduces response time and creates flexibility (Irfan, Xiaofei & Chun 2008).
Source: Jespersen & Skjott-Larsen ( 2005), p. )
The above model illustrates the Resource Chain Management circuit in conditions of planning specific to the necessity of the organization (Jespersen & Skjott-Larsen 2005). Following this model, step one is to identify the operation strategic requirements - efficiency in investment, products procurement and space requirements.
This is the planning part where in fact the CEO and Grandiose Motors management team will brainstorm and explain the strategies and guidelines. The purpose is to recognize the required source chain capabilities and gaps appropriate to resolve the operation obstacles. As of this time, it's been earlier recognized that the difficulties involve investment, equipment procurement and space requirements.
Though meetings, debate and interviews, data are obtained and documents are checked for the info sources; like accounts, suppliers lists, demand reports, product inventory, infrastructure, warehouse distribution and expenses as well as others.
Data accumulated will be examined and the SCM model will be recommended. This model includes cost, warehouse, circulation and inventory for supplies and materials. Validation will be done by funding and management. Conclusions and results and possible issues will be recognized from test data and the model. Referrals will be offered to find the endorsement of CEO and the management in order to design the solution model.
The Supply String simulation model will be presented. This is actually the model designed specifically to address challenges and operation of Grandiose Motors. Furthermore, an optimal string model will show the financial impact.
Based on the suggestion the solution that'll be put in place for Grandiose motors will be provided. Details of the task, the resources, suppliers, accountability, composition and timeline will be included. Execution or Outcome will perform a Solution Execution Plan. This will detail out the duty, the source of information, the involved get together or associates and the time body. The simulation plan will show opportunities and gaps in order to create a specific solution. See illustrations below.
Saurce: Jespersen and Skjott-Larsen (2005, p. )
Purchasing and inventory management procedures and procedures will differ depending on the processes and guidelines of the individual distributor in the Source Chain. Along with the SCM, these dissimilarities can be reduced since companies and suppliers are now acquainted with efficiency and organized process. Purchasing and inventory management ensures physical control and design of key areas of operation. This manages the different techniques with third people and other partners essential to availableness and procurement of items and parts. This might cover forecasting and replenishment strategies, variety calculation and inventory systems (Muller 2003).
In the truth of Grandiose Motors, the four dealership sites are taking care of various car make and models which would entail different suppliers for materials and parts. This would have various distinctions in procedures and methods like purchasing insurance plan, delivery time, demand, agenda and methods, forecasting, order location, payment settlement and return plans and others. In regards to to servicing, Grandiose Motors is aiding genuine parts for different car makes and models are which are being given by authorized retailers and wholesalers. Which is also selling over the counter products like oil, lubricants and supporters. And yes it has certain extra parts whose demand is merely seasonal. For Grandiose Motors, the company and its Purchasing department has already established a system to control this inventory and purchasing system. However, due to the business development, changes in procedure as well guaranteeing continuity of products and parts procurement in the future, it must reduce procuring and inventory costs insurance agencies a different coverage for different products. Following are the suggestions.
1. Utilizing a pull contract and an advance-purchase discount system for procuring seasonal parts. A pull contract has a single low cost price, and the company bears the source chain's inventory risk because only the company holds inventory while the store replenishes as needed through the season (Cachon 2004).
Advance -purchase system will give a low price for inventory purchased before the season, and a normal price for replenishments through the selling season thus they have two low cost prices. Also the chance allocation will be with the shop for parts purchased prior to the season as well as for the parts replenished during the season risk will be with the provider (Cachon 2004).
2. Maintaining higher level of inventories for quick moving parts like oil, lubricants and supporters and low inventories for gradual moving parts or genuine parts that are required only at the time of servicing (Duft 2010).
3. Decentralizing purchasing policy for servicing parts and centralizing for over-the-counter sales spare parts (Bossart et al. 2007).
4. Rearranging the sales area and storage area so that rapidly moving parts are often selected and restocked by the employees using mechanical means for storing and moving parts. Using space for storage interchangeably, with seasonal parts (Duft 2010).
5. Using JIT -Just with time inventory for swift moving and over the counter sales for parts like oil, lubricants and fans which are easily available and have a large volume of suppliers. JIT reduces inventory cost as firms have to incur costs and interest for keeping inventories (Morgan 1991)
INVESTMENT - Efficiency in savings
The solution for investment is settled through review of all processes and ensuring efficiency and getting rid of redundant process. This ensures cost minimization and ensures savings for the company. Minimize paper transactions and the use of recycled papers for receiving papers and documents is preferred. This will ensure savings on office equipment costs.
SPACE Necessity - Central Warehouse
The locations of the four dealership network may have significant differences, however the company must strategically situate a central warehouse for the four dealerships as it is more cheap. The 45 minute to one hour drive is preferable to booking expensive warehouse spots. Furthermore, proper arranging of products and parts replenishing will ensure a proper inventory system is set up. The following will be engaged - transportation of company - moving trucks, warehouse people and warehouse section, database in place for inventory and order system, central warehouse.
The above tips - automation, paper-less deals, process efficiency and other cost reduction options for Grandiose Motors will ensure cost savings on investment. Since you don't have to avail on expensive warehouse spots, the company will save more to utilize the investment in purchasing items and promoting system automation and repository software. The Central Warehouse may be positioned in one of the network dealerships or in the key office of Grandiose Motors; this will just be an additional service and can not require additional start up investment. Service levels and performance management are assessed through the business's key performance indicators. They are measurable aims to ensure that the performance of the company is able to attain its target and measure the savings and cost of the organization (Muller 2003). The service level for Grandiose Motors depends upon various factors such as servicing turn around time, timely option of products and parts for different dealership network, sales and volume level, circulation and inventory.
Below is the test transport and product packaging process model accompanied by Toyota Motors which illustrates the model to follow and means that each process is documented and all are aware of the system (Iyer, Seshadri &, Vasher 2009).
By Pursuing SCM concepts, best options and sustainability of the business is made certain through proper sourcing of suppliers, planning of warehouse and savings efficiency in operations to manage investment money. The forecasted implication will be a change in operation. For effective management of inventory and also to meet the changing demand and offer trends of the marketplace, it is essential to develop a SCM which is attentive to the vibrant business environment to be able to benefit from the new opportunities on the market (Leon Pe±a 2008).
Grandiose Motors should utilize the services of consultants or third party pros expert with Resource String management and familiar in the Automobile dealership, servicing and supply procurement. SCM can be outsourced at Grandiose Motors.
ERP packages are used to swap traditional separate SCM into a built-in suite for a new business model producing a compact move of information through the business. It can help in automation of SCM updation, inventory control, reporting, ordering, and scheduling, (Wu & Kao, 2006).
Supply chain management is a system that is implemented to a business to ensure upgraded performance. For organizations that are new to this model and application, this can be change that needs to be supervised. Management has a significant role in ensuring that the program and execution of the SCM model has been completed. With the growth of a business, the entire organization should understand the way of the company and that the quality methods through SCM and efficiency in operations should be inspired.
This paper proposed recommendations for the improvement in terms of resolving the existing issues in investment, space and supplies procurement. In addition to this the benefits and implication to business of SCM theory has been mentioned.